KSFB Management, a Hollywood business management firm, has alleged it was deceived by The Goldman Sachs Group when trying to sell itself in 2022, with the bank using confidential information to pursue a more lucrative $7bn deal with private equity firm Clayton Dubilier & Rice (CDR), according to a report by Bloomberg.
The report cites a lawsuit, which was filed last week in a New York state court, as revealing KSFB’s claims that it was strung along as Goldman Sachs used private information to help broker CDR’s 2023 acquisition of wealth and business management firm Focus Financial Partners.
This is the second lawsuit filed by KSFB regarding the matter; the first, which was filed in Los Angeles last year, was dismissed after Goldman argued that New York was a more appropriate jurisdiction for the matter to be heard.
KSFB, which supplied management services to Focus on a contract basis, claims that it first engaged Goldman Sachs’s services in March 2022 to explore the sale of its business, while also informing Focus of its intentions to either sell or become an independent firm.
KSFB then claims that the bank used confidential information to help arrange the 2023 acquisition of Focus by CDR, and worked with Focus to keep KSFB onboard to maximise the acquisition price.
Unknown to KSFB, Focus received its first offer from CDR in August 2022, spending months negotiating the price before the deal was announced in February 2023, according to the lawsuit.
Goldman Sachs, alongside Jefferies Group, served as financial advisor to Focus’s board of directors with regards to the acquisition.
Focus and its Co-Founder, Leonard Chang, were named as defendants in the lawsuit, in addition to Patrick Fels, a Banker at Goldman Sachs.
As a result, KSFB alleges, the Focus deal “spoiled the market” for its own sale and substantially decreased its value as a smaller firm, while Goldman made over $30m in fees and Chang received a golden parachute exceeding $12m.
KSFB has sought an undisclosed amount in damages from Goldman Sachs and Focus for “fraudulent” conduct and violations of state law, including fraudulent inducement and breach of fair dealing.
Goldman has disputed KSFB’s allegations through its Spokesperson, Sophia Anthony, who said: “As we said when the plaintiff tried — and failed — to bring this lawsuit in California, these claims are without merit.
“From the outset of our engagement, Goldman Sachs acted fairly and honestly to run an efficient, competitive process.”